How Does COBRA Coverage Work?

What is COBRA?

COBRA (stands for Consolidated Omnibus Budget Reconciliation Act) gives the employees the right to continue their health coverage through an employer after they have a reduction in hours or they leave employment (whether voluntary or involuntary.) The catch is that you have to pay the full amount of the premium, and often a surcharge.

When you get health insurance through an employer, the employer is required to pay a percentage of that cost (usually at least 50%) for the employee (but isn’t required to contribute to any dependents.) So when you get your COBRA notice, you’ll probably be shocked to find that the cost to continue the coverage is substantially more than it cost while you had the coverage under your employer. Plus there is an additional fee your employer can add to premium for administration costs. In California, and depending on how many employees the business has, that fee could be as much as 10% or the employer may choose to not add one.

The coverage from the plan, as well as access to doctors, will remain the same under a COBRA plan.

Qualifying Notice

The group’s health plan administrator must be told about the COBRA Qualifying Event. The employer has 30 days after this event to notify the plan if you have any of the following qualifying events:

  • Loss of employment (whether voluntary or involuntary,)
  • Loss of eligibility due to a reduction of hours worked,
  • Death of the employee (so spouse and dependents can continue coverage if needed,)
  • The employer files for Chapter 11 bankruptcy.

The employee must notify the employer within 60 days of these family changes:

  • Divorce or legal separation,
  • Child’s loss of dependent status.

Within 14 days of receiving the notice, the employer or health plan administrator must give the person who is losing coverage a written notice of his or her COBRA rights. This is called an Election Notice. It should contain all of the information you’ll need to understand COBRA coverage (albeit it might be confusing to figure out,) and contain information on the name of the person who handles COBRA for the health plan, how much it costs, and how to elect the coverage.

What do I do When I get a COBRA Election Notice?

Well, you have some choices to make and some options.

Enroll in COBRA: The first one is self-explanatory. If you like the plan you have, it’s affordable and you can’t get a better deal on it – you can just sign up for it. You’ll want to talk to the person listed on the Election Notice if you have any questions. But you should consider all the other options first.

Enroll in an Individual Health Plan: When you lose your health coverage through your employer, it creates a Qualifying Event to go into the market and purchase your own insurance even when it is not open enrollment. You have a limited timeframe, so it’s best to start shopping immediately. For a lot of individuals, this is a great option because you might be able to qualify for Premium Assistance based off your income and household size, which can result in significant savings on your insurance rates. If you’re in this situation and would like to shop for individual health plans, please feel free to request a quote from me. I’d be happy to help.

Enroll in your spouse’s or parent’s plan: If you’re married and your spouse has coverage through his or her employer, you can enroll on the same day you lost coverage into your spouse’s plan even though it’s not their open enrollment. You have a limited time-frame to submit your enrollment paperwork. If you’re under age 26, you can also enroll in a parent’s health plan if the parent will allow you to.

Enroll in Medi-Cal: If you’re underneath the income requirements to enroll in Medi-Cal, visit your local California Department of Health Care Services to apply and enroll. You’re usually eligible immediately.

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